Zimbabwe: Local Currency in 12 Months - Finance Minister

Finance and Economic Development Minister Professor Mthuli Ncube yesterday said the country will have its own currency within the next 12 months&comma; as Government is frantically working on raising enough foreign currency to anchor it&period;

Addressing delegates at a "Road to Davos" townhall meeting in the capital yesterday&comma; Prof Ncube said adopting the United States dollar or the South African rand would not solve the country's macro-economic problems&period;

"On the issue of raising enough foreign currency to introduce the new currency&comma; we are on our way already&comma; give us months&comma; not years&comma;" he said&period;

Asked to give a timeline on when currency reforms would be implemented&comma; Prof Ncube said it would be done "in less than 12 months"&period;

He said separating the parity between Real Time Gross Settlement accounts &lpar;RTGS&rpar; and foreign currency accounts &lpar;FCA&rpar; was the beginning of currency reforms which are necessary for pushing the country's economy in the right direction&period;

"There is a balance between preservation of value and removing price distortions&comma;" said Prof Ncube&period;

"The separation of accounts between the FCA and RTGS accounts was the beginning of currency reform&period;"

Prof Ncube said he was no longer in favour of adopting the rand as that would still depend on the availability of US dollars&period;

"I also hear that the citizens are pushing towards adopting the rand&comma; I even argued for it years ago and there was a reason&comma; you know&comma; if we are going to assume the rand as our currency&comma; we first of all have to acquire the rand and we need US dollars first to purchase the rand&period; In the long-term&comma; Zimbabwe needs its own currency&comma;" he said&period;

"Our job is to introduce a currency that will be stable and less volatile&period; Dealing with the fiscal side is the first order to move towards a stable currency&period; After all&comma; what we have now is fiscal policy and now monetary policy and we have to tighten the belt on the currency volatility&period;"

Adopting the United States dollar as the country's sole legal tender is not the way to solve Zimbabwe's macro-economic challenges&comma; said Prof Ncube&period;

This comes as different companies and individuals have been pushing for the re-dollarisation of the economy&comma; with claims that the shortage of hard currency is choking business operations&period;

Recently&comma; Delta Corporation announced that it would start selling its products in hard currency&comma; citing that operations were being adversely affected by foreign currency shortages&period; The decision was later reversed after consultations with the Government&period;

"The issue is shortage of forex with the corporates&comma; the silver bullet is about currency reform&comma; if we get that right the corporates can access foreign currency whenever they need it&comma; the currency reform agenda is also impeding foreign investment&comma; if investors cannot take their money out of the country then we cannot attract investors&comma;" he said&period;

"A long-term solution to the crisis is&comma; currency reforms&comma; currency reforms&comma; and currency reforms&semi; and ending arbitrage opportunities in the market&comma; accepting the US dollar as the only legal tender is not currency reform&comma; its submission&period;

"As a nation if we accept US dollar as our sole currency&comma; then it means that we are afraid of currency reform and that's capitulation&period;" This also comes at a time when industry has also raised a red flag towards re-dollarisation&period;

Confederation of Zimbabwe Industries &lpar;CZI&rpar; president Sifelani Jabangwe is on record saying re-dollarising the economy is counter-productive as it stifles growth and could halve the size of the economy&period;

"We see more companies wanting to sell in US dollars&comma; but the issue is that we don't need dollarisation as an economy&comma;" said Mr Jabangwe&period;

"The economy will shrink by as much as 50 percent if we dollarise&comma; so for me it is not the right way to go&period; We have seen it with US dollars in the past that we won't be competitive when using the US dollar&period;"

An economist with a local commercial bank Joseph Mverecha has on countless times weighed in&comma; disapproving the re-dollarisation of the Zimbabwean economy&period;

"Re-dollarisation will sustain disintermediation and dislocation in the economy&comma; to the extent that foreign exchange access is non-existent for the vast majority of Zimbabweans who are non-exporters and constitute the largest segment of the population&comma;" said Dr Mverecha&period;